Although I’ve rarely met a tax cut I didn’t like, the payroll tax debate is over a largely meaningless issue. Here in the words of the Wall Street Journal is what it boils down to:
Keep in mind that the payroll tax "cut" is nothing more than a tax holiday. All the political palaver is about extending it for one more year, through 2012, so Mr. Obama can claim he did something for middle-class voters before Election Day. Because it is temporary, the tax holiday will do little to change employer incentives to hire.
Former George W. Bush spokesman Ari Fleischer points out that the endless sparring of the Democrats and Republicans over the extension of the payroll tax holiday highlights how rotten the tax code is. Fleischer notes that the president’s first rational for the holiday was that it would stimulate the economy. When that failed, his rationale became about fairness.
Fleischer notes:
But cutting the payroll tax while holding Social Security payments steady means there really is no trust fund and Social Security is just another redistribution-of-income program….
But cutting the payroll tax while holding Social Security payments steady means there really is no trust fund and Social Security is just another redistribution-of-income program.
Nevertheless, Republicans, recognizing the trap they would fall into if they oppose the extension, are using this debate to try to do something that really could benefit the economy: force a decision on the Keystone XL pipeline within 60 days. As you recall, the president delayed the project until after next year's election so he won't have to pick between big labor, which wants the pipeline, and enviros who don't. The Journal notes:
This is the most shovel-ready project in America, as the TransCanada company has already made plans to buy the steel pipe to carry crude oil from Canada and the Upper Great Plains to the Gulf of Mexico. The pipeline would create thousands of new jobs, both immediately and downstream, which is why the Teamsters and other unions support it.
The “Hamlet of Pennsylvania Avenue” could still kill the project, but he would have to make a stand, not just delay the project. The House-passed bill has a provision to allow TransCanada to begin in 60 days, unless the president stops it.
Eight Senate Democrats have said publicly that they lean towards letting the project go forward. If passed in both Houses, the president would have to veto the payroll tax bill and stop a job-creating project.
The president’s regulations have stifled a great deal of job creation in the last three years, but this time the job killing might be too obvious for comfort.